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The Effect of Price and Entry Regulation on Airline Output, Capacity and Efficiency

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  • Arthur S. De Vany

Abstract

This paper develops a model of capacity utilization in an industry where price and entry are regulated. The distinctive feature is that capacity affects waiting time of consumers, and, therefore, influences demand. The result is that capacity utilization, output, and costs are jointly determined as a function of the regulator's policies, the value of time of consumers, and other exogenous variables. The model is estimated with airline data, and estimates of the price elasticity of demand, corrected for induced quality variation, and of the consumer's marginal valuation of capacity are obtained. These are then used to assess the efficiency of airline regulation.

Suggested Citation

  • Arthur S. De Vany, 1975. "The Effect of Price and Entry Regulation on Airline Output, Capacity and Efficiency," Bell Journal of Economics, The RAND Corporation, vol. 6(1), pages 327-345, Spring.
  • Handle: RePEc:rje:bellje:v:6:y:1975:i:spring:p:327-345
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    Cited by:

    1. repec:eee:retrec:v:66:y:2017:i:c:p:12-25 is not listed on IDEAS
    2. David Card, 1989. "Deregulation and Labor Earnings in the Airline Industry," Working Papers 627, Princeton University, Department of Economics, Industrial Relations Section..

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